Korn Ferry Navigates Challenges with Strategic Growth

Korn Ferry ((KFY)) has held its Q3 earnings call. Read on for the main highlights of the call.

Korn Ferry’s recent earnings call painted a picture of robust growth and strategic resilience amidst a challenging economic landscape. The company reported strong new business growth and increased profitability, driven by successful large-scale engagements, particularly in the Americas and EMEA. However, challenges were acknowledged in the digital segment, with a noted decline in new business, compounded by ongoing macroeconomic difficulties. Despite these hurdles, Korn Ferry is navigating the environment with strategic transformations and expansions.

Strong New Business Growth

Korn Ferry reported a 13% year-over-year growth in total firm new business, largely propelled by the Americas and EMEA regions. This growth underscores the company’s ability to capture new opportunities and expand its market presence despite economic headwinds.

Increase in Dividend

In a move that signals confidence in its financial health, Korn Ferry announced a 30% increase in its quarterly dividend. This marks the sixth increase in the past five years, reflecting the company’s commitment to returning value to its shareholders.

Improved Adjusted EBITDA

The company’s adjusted EBITDA saw a 13% year-over-year increase, reaching $114 million. The adjusted EBITDA margin also improved by 190 basis points to 17.1%, highlighting enhanced operational efficiency and profitability.

Successful Engagements

Korn Ferry secured significant transformation engagements, including projects with a global energy company and leadership programs at large employers. These wins demonstrate the company’s capability to deliver impactful solutions at scale.

RPO Business Performance

The RPO segment reported new business of $210 million, with 65% coming from new clients. Additionally, RPO fee revenue grew by 6% in the third quarter, showcasing the segment’s strong performance and client acquisition strategy.

Consulting and Digital Segments Growth

Consulting new business increased by 3% at constant currency, with an adjusted EBITDA margin up 100 basis points to 17.7%. Digital fee revenue also rose by 3% in constant currency, indicating steady growth in these segments.

Digital New Business Decline

Despite overall growth, the digital segment experienced an 8% decline in new business trends in constant currency, contrasting with the previous quarter’s 10% growth. This decline highlights challenges in the digital arena.

Macroeconomic Environment Challenges

The macroeconomic environment for consulting services has been challenging for the last eight quarters, impacting the company’s operations. Korn Ferry continues to adapt its strategies to mitigate these external pressures.

Professional Search and Interim Stabilization

The Professional Search and Interim segments remained stable, with new business and fee revenue flat year-over-year at constant currency. This stability reflects consistent performance amidst broader market challenges.

Forward-Looking Guidance

Looking ahead, Korn Ferry provided optimistic guidance for the fourth quarter, expecting fee revenue to range between $680 million and $700 million, with an adjusted EBITDA margin of 16.8% to 17%. The company’s diversification strategy, with marquee and diamond accounts comprising 39% of the portfolio, positions it well for future growth.

In summary, Korn Ferry’s earnings call revealed a company that is navigating a complex economic landscape with strategic acumen. While challenges persist, particularly in the digital segment, the company’s strong new business growth, increased profitability, and strategic engagements highlight its resilience and adaptability. Investors and stakeholders can take confidence in Korn Ferry’s forward-looking strategies and financial health.